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Who does this affect?

Secured financiers, lessors and suppliers of goods.

What do you need to do?

Identify and review contracts subject to PPS and prepare for ongoing compliance with PPS.

Author
John Canning  
Partner
John Canning  
Partner
T +61 2 9296 2098

PPS Bill: major changes to personal property securities registration

Proposed changes to the Personal Property Securities Bill 2009 (PPS) recently introduced into the House of Representatives, signfies an overhaul of the registration of securities.

The PPS Bill was referred by the House to the Senate. Prior to that, the NSW parliament referred their state powers to the Commonwealth to enact PPS. Other States will follow suit.

At a glance

PPS will establish a national system for the registration of security interests in all property other than land. It will include new rules for determining priority between competing security interests in the same personal property.

PPS affects the way security is taken over almost every form of property other than land. This will affect the business of financiers. However, the legislation will also effect transactions which are currently not regarded as securities and this will impact on the business of lessors and suppliers of goods.

How does the PPS affect you?

PPS:

  • will affect the categories of registrable (or “perfectable”) securities which are being broadened to include arrangements not currently registrable, for example, certain leases and consignments (retention of title arrangements)
  • will affect the parties who security will be registrable (or “perfectable”) against, for example, individuals, foreign companies
  • is intended to provide for on-line system registration of personal securities which is cheaper and more efficient.

When does PPS start?

PPS will commence 26 months after the month in which the Bill is given Royal Assent or an earlier time as determined by the Minister administering PPS. This provision is a reaction to the March 2009 Senate Committee Report on PPS that PPS commence in May 2011 not May 2010 as originally planned. We understand the Council of Australian Governments (COAG) will have input into this and it is highly likely that PPS will commence in May 2011 after COAG’s consideration.

This is good news for all stakeholders as it gives them more time to prepare for implementation.

What do you need to do now?

To prepare for the implementation of PPS you need to:

  • identify contracts or arrangements which are not now currently registrable. For example, leases, consignment contracts, contracts with individuals which will fall under the PPS regime. There will be a 2 year transitional period with rules relating to perfection after the 2 year period.
  • review contracts which are currently on a register for example, the ASIC companies register. Those contracts will need to be identified when they are “migrated” to the PPS Register. The PPS Registrar can migrate the data of existing registrable securities by applying legislative instrument to a property class subject to the PPS regime or by registering a financing statement. For example, bills of sale registered against individuals in NSW or charges registered against companies on the ASIC Companies Register will be migrated. Care will need to be taken to ensure effective migration of security interests to the PPS register.
  • ongoing compliance will need to be undertaken:

 
  • to ensure compliance with PPS. Failure to do so will result in loss of priority of security against other creditors or extinguishment of a security in the case of an insolvency.
  • to re-write standard documents to comply with PPS regime, for example leases and security documents.
  • for credit approval procedures. For example, financiers who lend to lessors or consignors on a secured basis will need to ensure that their borrower has perfected their security interest in any leased or consigned goods to maintain the value of their business so other creditors will not claim the financed assets over the secured financiers. Equally the converse may apply to other creditors as well.
  • for new PPS enforcement provisions.

The Senate Selection of Bills Committee has referred the PPS Bill to the Legal Senate and Constitutional Affairs Legislation Committee for inquiry and report by 7 August 2009.

This publication is only a general outline. It is not legal advice. You should seek professional advice before taking any action based on its contents.